Help Smart Mart decide what to do by completing the following chart (treat each possibility independently) — Inc considering one three options paying cash dividend distributing

Smart Mart Inc. is considering one of three options: (1) paying a $0.40 cash dividend, (2) distributing a 5% stock dividend, or (3) effecting a 2-for-1 stock split. The current fair value is $14 per share.

Instructions

Help Smart Mart decide what to do by completing the following chart (treat each possibility independently):

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	Before Action	After Cash Dividend	After Stock Dividend	After Stock Split
Total assets	$1,875,000	$1,851,000	$1,875,000	$1,875,000
Total liabilities	$ 75,000	$ 75,000	$ 75,000	$ 75,000
Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders’ equity Number of common shares	1,200,000 600,000 1,800,000 $1,875,000 60,000	1,200,000 576,000 1,776,000 $1,851,000 60,000	1,242,000* 558,000 1,800,000 $1,875,000 63,000	1,200,000 600,000 1,800,000 $1,875,000 120,000

Help Smart Mart decide what to do by completing the following chart (treat each possibility independently) — Inc considering one three options paying cash dividend distributing

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SOLUTION